President Donald Trump told Republican senators during a private lunch Tuesday that he is willing to let expanded unemployment benefits expire at the end of July, a decision that would massively slash the incomes of tens of millions of people who have lost their jobs due to the Covid-19 crisis.
"If the emergency UI top-up isn't extended, unemployed workers will effectively get a pay cut of 50-75% overnight."
—Ernie Tedeschi, former Treasury Department economist
The Washington Post reported Tuesday that the president "privately expressed opposition to extending a weekly $600 boost in unemployment insurance for laid-off workers affected by the coronavirus pandemic, according to three officials familiar with his remarks."
House Democrats passed legislation last week that would extend the beefed-up unemployment benefits through January of 2021 as experts and government officials—including Federal Reserve chair Jerome Powell—warn the U.S. unemployment rate could soon reach 25%. The unemployment insurance boost under the CARES Act is set to expire on July 31, even as many people have yet to receive their first check.
"With nearly 1 in 5 Americans out of work, Donald Trump's plan is to cut off the boost to unemployment benefits and shower his wealthy buddies with more tax cuts," Sen. Ron Wyden (D-Ore.), one of the architects of the unemployment insurance expansion, told HuffPost. "This is the worst economic crisis in 100 years and Donald Trump is doubling down on Herbert Hoover's economic playbook and pushing workers to risk their health for his political benefit."
— Kaila Hale-Stern (@kailahalestern) May 20, 2020
Sen. Lindsey Graham (R-S.C.)—who declared earlier this month that Congress will only extend the boosted unemployment insurance "over our dead bodies"—said after the private lunch that Trump believes the benefits are "hurting the economic recovery." Graham was one of several Republican senators who opposed the initial expansion of unemployment benefits as too generous.
An analysis released last week by the Hamilton Project, an initiative of the Brookings Institution, found that expanded unemployment benefits offset "roughly half of lost wages and salaries in April." Unemployment insurance has "been essential to families, and is vital for keeping the economy from cratering further," the authors of the analysis noted.
Ernie Tedeschi, a former Treasury Department economist, estimated that "come July 31, if the emergency UI top-up isn't extended, unemployed workers will effectively get a pay cut of 50-75% overnight."
"It's increasingly looking like there won't be enough labor demand to hire them all back at that point," Tedeschi tweeted.
The latest Labor Department statistics showed that more than 36 million people in the U.S. have filed jobless claims since mid-March as mass layoffs continue in the absence of government action to keep workers on company payrolls. Despite the grim numbers, the Post's Jeff Stein reported Tuesday that the White House is "predicting a swift economic recovery" as it resists additional efforts to provide relief to frontline workers and the unemployed.
On top of rejecting an extension of enhanced unemployment insurance, Trump last month publicly voiced opposition to another round of direct stimulus payments, instead advocating a cut to the tax that funds Social Security and Medicare.
As the Trump administration pushes states to reopen amid the coronavirus pandemic, the Labor Department is encouraging states to help employers report workers who refuse to return to their jobs out of fear of contracting Covid-19. The Labor Department said on its website that "general concern" about coronavirus infection is not sufficient grounds to refuse work and still receive unemployment benefits.
On Tuesday, Wyden and nearly two dozen other Senate Democrats sent a letter to Labor Secretary Eugene Scalia demanding that the department "make clear that individuals cannot be forced to choose between keeping their income and putting their lives in danger."